Obama to meet Congress leaders Thursday on debt
WASHINGTON (Reuters) - President Barack Obama rejected proposals on Tuesday for a short-term deal to raise the U.S. debt limit and pressured congressional leaders to reach a broad agreement within two weeks to avoid a government default by August 2.
Obama invited Democratic and Republican leaders of the U.S. Congress to the White House on Thursday to take stock of the stalled negotiations to reach a deal on budget cuts that would give Congress political cover to raise the $14.3 trillion debt ceiling that caps U.S. borrowing.
The talks collapsed in acrimony two weeks ago and both sides have blamed the other for failure to reach a deal.
Democrats and Republicans have reached a rough agreement on billions of dollars in government spending cuts but are at loggerheads over taxes. Democrats want to increase taxes on wealthier Americans to help lessen the deficit, while Republicans refuse any tax increase, fearing it would worsen the country's 9.1 percent jobless rate.
The White House is looking to clinch a deal by July 22 to soothe market fears and give Congress time to approve it.
"We need to come together over the next two weeks to reach a deal that reduces the deficit and upholds the full faith and credit of the United States government and the credit of the American people," Obama told reporters at the White House.
Republicans were skeptical that a new White House meeting would make much difference.
"I'm happy to discuss these issues at the White House, but such discussions will be fruitless until the president recognizes economic and legislative reality," House of Representatives Speaker John Boehner said in a statement.
"The legislation the president has asked for -- which would increase taxes on small businesses and destroy more American jobs -- cannot pass the House, as I have said repeatedly," said Boehner, the top Republican in Congress.
Senate Republican leader Mitch McConnell said he viewed the meeting as an opportunity to know "whether or not the president will finally agree to a serious plan to reduce the deficit."
Republicans were angered a week ago when Obama accused Congress of spending too little time on the problem and compared lawmakers to schoolchildren putting off their homework.
Republican Senator John Cornyn floated the idea over the weekend of a short-term measure to lift the debt ceiling for six to eight months in order to meet the August 2 deadline while congressional negotiators take more time to work on a broader agreement.
"I don't share that view," Obama said in rejecting the proposal.
Congress must raise the U.S. borrowing limit to avoid a default, which could trigger a spike in interest rates, push the United States back into recession and send global financial markets plummeting.
The U.S. Treasury has said it will run out of money by August 2 to pay all of the country's bills, including Social Security payments.
U.S. markets so far have shrugged off the looming default deadline but the Obama administration has warned of economic catastrophe if the country fails to meet its financial obligations.
With the budget talks in an impasse, neither side has come forward with the kind of compromise that will be needed and instead have been engaging in political posturing.
Democrats have criticized Republicans for defending tax breaks that benefit corporate jets, yachts, races horses and other luxury items. Those breaks have a minimal impact on the budget but have high symbolic value.
Republicans said that closing those tax breaks would hurt businesses and the economic recovery.
Boehner took a dig at the president's leadership.
"I'm pleased the president stated today that we need to address the big, long-term challenges facing our country. Our nation's long-term future requires presidential leadership to address those challenges," Boehner said in his statement.
A final deal will test the ability of Obama and Boehner to compromise because both of whom must answer to the left and right wings of their parties with an eye on 2012 elections.
Obama said he had a series of discussions with congressional leaders from both parties over the July 4 holiday weekend.
"We've made progress, and I believe that greater progress is within sight. But I don't want to fool anybody, we still have to work through some real differences," he said.
On Capitol Hill, Senate Democratic Leader Harry Reid said he would stage a vote on a nonbinding resolution that would call on millionaires to "make a more meaningful contribution to the deficit reduction effort."
It would have no legal impact, but it would allow Democrats to continue a charge they have honed in recent weeks -- that Republicans are more interested in defending the interests of the wealthy than solving the country's budget problems.
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